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Gaming Guru

Howard Stutz

Shift at top fuels speculation about Ameristar ownership

3 June 2008

LAS VEGAS, Nevada -- Speculation about the future ownership of Ameristar Casinos resurfaced Monday after the company replaced its CEO with executives who have longtime ties to the casino operator and its founder, the late Craig Neilsen.

John Boushy, a former Harrah's Entertainment executive who spent almost two years as Ameristar's CEO and president, resigned both his day-to-day operational duties and his seat on the company's board of directors.

Gordon Kanofsky, who has been an executive with the company since 1999, replaced Boushy as CEO. Larry Hodges, a member of Ameristar's board of directors since 1994, was named president and COO.

Ameristar is headquartered in Las Vegas but operates two Nevada casinos in the town of Jackpot near the Nevada-Idaho border. The company owns eight casinos, primarily in the Midwest.

Speculation abounded about Ameristar's future in late 2006, following the death of Neilsen, who controlled roughly 55 percent of the company's stock. His holdings were transferred to his foundation, which is focused on spinal cord injury research.

In February 2007, company executives told Wall Street that Ameristar was not on the auction block.

"While we do not believe anything is imminent, the recent changes may signal that the company could be up for sale, particularly once gaming industry valuations improve and the credit markets become more liquid," Macquarie Group gaming analyst Joel Simkins said in a note to investors after the announcement. Deutsche Bank gaming analyst Bill Lerner said he didn't think the management change would be a catalyst for a buyout.

"It's a surprise. I don't think Wall Street suspected anybody was unhappy," Lerner said.

JP Morgan gaming analyst Joe Greff told investors Ameristar is for sale.

"We continue to find the likelihood of a take-out as low given credit markets and soft property level results," Greff said.

Boushy, who spent 27 years in senior management positions with Harrah's, became Ameristar's president in August 2006. When Neilsen died in November 2006, Boushy was immediately named CEO.

During his time heading the company, Boushy said Ameristar was seeking expansion opportunities. In April 2007, the company spent $675 million to buy the Resorts East Chicago riverboat casino in Indiana, about 25 miles from downtown Chicago.

The company also undertook an expansion program at its casinos near Denver; St. Charles, Mo.; and Vicksburg, Miss. Last month, Ameristar reported a quarterly loss of $77.1 million in the first quarter, blaming a noncash impairment charge of $129 million related to the company's purchase of the East Chicago casino.

Simkins said Boushy may have had trouble blending some of Harrah's branding and marketing philosophies with Ameristar's operational structure.

"We are not terribly surprised by the move, as our contacts have indicated that Boushy had felt some heat over the challenging Resorts East Chicago acquisition, some general inertia with regard to key decisionmaking as well as his efforts to potentially alter an already successful corporate culture," Simkins said.

According to a filing with the Securities and Exchange Commission, Boushy will be paid $1.6 million over a two-year period as part of his separation agreement.

Kanofsky, 53, became co-chairman of the Ameristar board along with Neilsen's son, Ray Neilsen, upon Craig Neilsen's death. Ray Neilsen was named the sole chairman of the board Monday.

Kanofsky and Ray Neilsen are co-executors of the Craig H. Neilsen Estate and serve as co-trustees and members of the board of directors of The Craig H. Neilsen Foundation.

"Given the Neilsen Estate's significant ownership of Ameristar, our interests are very closely aligned with all shareholders," Ray Neilsen said in a statement.

Ameristar is traded on the Nasdaq National Market. Investors had little reaction to the management changes, with shares closing at $17.60, down 22 cents, or 1.23 percent.